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Adi12982
06-08-2009, 01:39 PM
Hello there -

I wanted to get as much info as you'd be willing to share about first time home buying. . . anything about loans (FHA, etc)., getting the best rates, the $8000 tax credit (how it works, how to get it, is it a deduction or do you get a check. . . ) etc.

DH and I are in Miami, and I have seen many homes in the area we want to live in for less than $150,000.

I don't need advice about whether now is a good time to buy or not, etc., just details and information that you would have found valuable your first time.

Thanks so much in advance!

Ashley Kees
06-08-2009, 01:46 PM
The tax credit is not a check or a deduction. It is a refundable tax credit like the additional child tax credit, and is based on the purchase price of the house and your income level. Married filing jointly has a cap of $170,000 income, I believe.

Basically, if your income is under the limit, the tax credit amount is based on the purchase price of the home, 10% of the purchase price up to $8000. That $8000 will help reduce your tax liability, and anything excess will be refunded to you, as would any tax refund. This is in addition to EIC and additional child tax credit, which are both refundable tax credits (meaning you can be refunded the whole amount you are eligible for, not just up to the amount of tax liability you owe).

The house must be CLOSED on by December 1st, not the 31st, and you must remain in the house for a minimum of three years, or you will owe the whole $8000 back to the government. If you close on November 30, 2009, you cannot sell the house again until December 1, 2012.

You cannot buy a home from a relative to get the credit.

If you anticipate that you will be eligible for the tax credit, you can adjust your withholding on your W-4 NOW at your employer's HR department, thus freeing up cash out of each paycheck to help build up more of a down payment. This allows you to access the refund *before* tax time.

mistysue
06-08-2009, 02:10 PM
Three HUGE things happened to me when I bought my first house, and I really wish somebody would have warned me about anything like this.

1) The yard flooded. I asked the neighbors if there was anything I should know before I made an offer and nobody knew anything...:rolleyes1 as soon as it happened they were all ready to say it happened every year. It cost $14,000 to get enough dirt to fix it (it was getting closer to the house yearly, and was caused by the next door neighbor's sump pump which he placed so that it emptied into my yard and then he built a retaining wall to block the flow... so that was a huge neighbor dispute there) Five years later, I am still paying $300/month on the loan for that.

2) Sewer rates went from $105/quarter to $255/quarter.

3) Township was redoing my street at a cost of $8,200 per house. Luckily they decided not to, but the backup plan included a 4' deep ditch in my front yard so 8' of my yard disappeared and my concrete driveway was replaced with dirt. :mad: I am not 20' from a ditch rather than 28' from my street.

Moral of the story: Wherever you plan to live- go to the city/town hall or wherever and find out any and all planned or proposed projects for where the house is. The former owner and the neighbors didn't tell me anything before I moved in, and he wasn't liable for the cost of any of it because it was all proposed but nothing was decided yet. My $834/month house started costing $1,210/month within a couple months, AND it would cost a small fortune to replace my driveway they dug up.

Piecey
06-08-2009, 04:07 PM
Start with a pre-approval at the bank.

The realtor took us a lot more seriously when we pulled out the pre-approval paperwork (but that might have been because DH and I are young- 21 and 26- and no one we encountered thought we'd get approved in the current market.)

Some places wouldn't let us put in an offer without a letter of pre-approval, so it's really the best place to start.

No advice on getting the best rate.. we chose our bank because I work for them and we have a VA loan because we wanted to keep our down payment money for stuff like the PP mentioned-- it's crazy the crap you run into when you buy a house!

Like the PP said, too, the tax credit is given to you with your refund. We got it for last year (we have to pay ours back, since we closed in 2008) and it just came direct deposit with the rest of our refund! HTH.

Adi12982
06-08-2009, 04:28 PM
Start with a pre-approval at the bank.

The realtor took us a lot more seriously when we pulled out the pre-approval paperwork (but that might have been because DH and I are young- 21 and 26- and no one we encountered thought we'd get approved in the current market.)

Some places wouldn't let us put in an offer without a letter of pre-approval, so it's really the best place to start.

No advice on getting the best rate.. we chose our bank because I work for them and we have a VA loan because we wanted to keep our down payment money for stuff like the PP mentioned-- it's crazy the crap you run into when you buy a house!

Like the PP said, too, the tax credit is given to you with your refund. We got it for last year (we have to pay ours back, since we closed in 2008) and it just came direct deposit with the rest of our refund! HTH.

Hey Piecey!! So cool to see you over here!! We were thinking of pre-approval. DH started a new job, so I think we have to wait for a paycheck or two from there first. We are young, but not as young as you ;) I'm 26 and DH is 27 (almost 28). I so want to get preapproved ASAP because I saw a few houses I love on remax.com today, but guess I should wait to start looking til the preapproval comes in.

Do you know how long that takes?

Piecey
06-08-2009, 04:44 PM
Hey Piecey!! So cool to see you over here!! We were thinking of pre-approval. DH started a new job, so I think we have to wait for a paycheck or two from there first. We are young, but not as young as you ;) I'm 26 and DH is 27 (almost 28). I so want to get preapproved ASAP because I saw a few houses I love on remax.com today, but guess I should wait to start looking til the preapproval comes in.

Do you know how long that takes?

DH and I actually BOTH started new jobs the month we got our pre-approval (so no pay stubs)...
They asked for a letter showing we had been offered the jobs (just the letter saying "Congratulations, you got the job!" worked) and then we verbally told them the income information. They just told us that we had to have pay stubs by the time we closed that showed the same information we had given them.

Pre-approvals aren't guarantees that a mortgage will go through, so they might be lenient with you on not having stubs yet.

I'd start now-- I can't remember how much of the stuff I had to dig out (years worth of w2's, paystubs, information for all my jobs, etc.) was for the preapproval and how much was for the actual mortgage.. and how much was for the VA...

Worst they can do is tell you they need the paystubs and even then they can get the ball rolling and when you get them-- wham! you're already ready to go and start looking.

Find a real estate agent you like, too.
We hated ours and it made the experience pretty crappy, I'll admit. :sad2:

Doodlebug939
06-08-2009, 04:53 PM
We are set to close on our home next Friday :scared1: I am excited and scared at the same time. Such a big decision.

You mentioned that you husband had a job change. Is this change in the same career field becuase if it is not then that might be a problem.

Some of the things that I learned is as follows:

Know how much you can afford. Regardless of the wacky number the bank gives you it is essential that you figure out what you guys are comfortable with. We were approved for 325,000 and we are under contract for a home that is 158,000. But I knew we could afford their numbers is we wanted we didnt want to be house poor. The preapproval itself took about an hour over the phone. It was that long only because they ask so many questions.

At that point we contacted a realtor. (Actually our bank found us a realtor and we are getting $950 for using their realtor when we close on the house)

Next-Look past carpet and little stuff. You might be able to get a forclosure in your area with little money down. I think FHA has something about needing little to close.

See if your area has a downpayment assistance program. That could be a grant that could save you thousands.

Have ANY home inspected. Yes it costs you money up front but let me tell you that it has saved us from making the worst decision of our lives on the home that we had under contract before. People think that the appraisal is good enough. However, the appraisal is for the bank to determine value. It is not to detect any defects or termites.

Ask for assistance with closing costs. Typically is could be 3% of the sale price. This will mean that you will have to bring less to the table. Also call about insurance rates before you put in a contract. Your agent should give you an approximate. The rates can be high in a hurricane region and it is better to know now what that will do to your budget before you close on a home.

Ok I have babbled! Best of luck!!!!!:grouphug:

Adi12982
06-08-2009, 04:58 PM
Thanks doodlebug!! That was helpful. DH don't want to go nuts either. . . After looking today I even lowered how much I want to spend. . . we were thinking around 200K, but now saw there are lots of homes in the area we want for 150K and under. The house I am actually loving right now is only listed at 115K. . .

I have a friend who is a Realtor, do you think that is a good idea or bad?? She has been my best friend since high school and we were friends all the way back in middle school.

Dani C
06-08-2009, 05:06 PM
Have ANY home inspected. Yes it costs you money up front but let me tell you that it has saved us from making the worst decision of our lives on the home that we had under contract before. People think that the appraisal is good enough. However, the appraisal is for the bank to determine value. It is not to detect any defects or termites.

I totally agree with this. I bought a few years ago (and not the first house I had an inspection done on) and luckily hired an inspector to help me out. A house that looked like it needed a little typical upkeep type repairs turned out to need around $20,000 in repairs immediately.

Also, ask the inspector if they give lower rates for repeat customers. Mine charged me around 75% of the price for the second inspection.

Additionally get everything in writing (dated) and save it. Lenders have rules they are supposed to follow, but they don't always follow them.

loonieroonie
06-08-2009, 07:12 PM
You've gotten some great advise already. I agree 100% with get an inspection. Make sure the inspector is certified and insured. I've had several clients use a relative or friend to complete their inspection and then find out after they've moved in that there were more issues with the home than cousin Bob was capable of pointing out. Also, using an uncertified inspector may lose you your earnest money or cause you to default on your contract. Read your contract, several foreclosure contracts state that if you decide you don't want to buy the house due to a negative inspection you have to provide a copy of the inspection report. If the inspector is not certified or insured you will forfeit your earnest money.

Finding a house is the hard part for you, a lot of time and effort spent looking at homes. The hardest part for your Realtor will come once you make an offer. Be mindful of all timelines given to you. If you are to have the home inspected within 10 (just an example) days understand when that starts and what is your last day. Typically these 10 days include time to turn in paper work to ask for repairs or to terminate your contract. For example you and the seller agree to a contract on July 1st. You have 10 days to inspect and ask for seller to make repairs or terminate the contract. So you must know does your 10 day period end on the 10th, with the 1st as day 1, or the 11th with the 2nd as day 1. I had a client ignore my calls concerning his inspection, didn't send me the request for repairs. Finally got me the paperwork on day 12, seller had every right to refuse to make the repairs and my client bought the house as-is. So mark on your calendar what day (and does it include weekends or business days only?) everything is due. It's your realtor's job to inform you of these things for your protection.

Along with an inspection contingency make sure you have an appraisal contingency (I'm sorry I don't know what the correct terms in Florida might be but we have these in Georgia). We've had many contracts terminated because the appraisal came back less than the agreed upon purchase price. Make sure you have IN Writing the terms of the appraisal contingency. Will the seller reduce the price to match the appraisal? Will you have a right to renegotiate the offer? Does the contract terminate? Or, will you have to pay the difference between what your purchase price is and what the actual appraisal is?

Also, have a finance contingency. Mortgages change on a daily basis so you don't want to get stuck with a mortgage you don't want or can't afford. Know your timeline. Know when you have to have your finances confirmed and locked. What will happen if you are not approved for the loan within this time frame? What happens if your lender denies the mortgage after the finance contingency period has expired?

Find a good Realtor. Someone who is looking out for your interest and not their own or the sellers. Have your own agent, using the seller's agent puts that agent in a tight, sometimes illegal, position to represent both parties. Understand your buyer's agency. Read it, do you have to pay the agent a retainer? Do you have to pay the Realtor commission? Do you owe them a commission if you terminate a contract? What is your realtor's responsibiltiy to you?

Most important have fun. It's fun to buy a house, yes stressful at times, but fun. If you are preapproved and have a good realtor and lender on your side, it shouldn't be stressful. Good luck. Sorry to ramble on, I just hate to see a first time buyer get burned. My dh and I were burned with our first purchase. I wasn't a realtor at the time, and didn't know any of the above things.

loonieroonie
06-08-2009, 07:15 PM
One more thing, get a home warranty. Ask the seller to pay for it. This will save you lots of money your first year when unexpected repairs come up. If the seller won't pay for it, pay for it yourself. It's worth it, just understand what it covers before you pick a company.

copper0426
06-08-2009, 07:38 PM
First off, I wouldn't use a friend if I were you. Even though you are best friends it could cause tension and not worth loosing a friend over.

I was a real estate legal secretary. Basically I worked for an attorney who handled closings. I strickly handled closings and refi's.

I wouldn't even do my own closing too busy with everyone elses. I hired the attorney who taught me.

As said previously do inspections, not just for water damage, but make sure they look for things like water turnoffs under sinks, may not be an issue on new houses, but older ones, you would be surprised. Make sure you look at window cranks, closet doors roof vents.

Living in Florida, I am sure you have seen houses that are a bit off the ground that have a crawl space. In some places it is because the water table is high. Do call your insurance company see if you are in a flood zone. If you are be sure to get flood insurance.

Be sure to ask if there has been any water damage.

Use an attorney you will pay a little more, not much, believe me you will be paying for a title company anyway if you just use a bank, so why not pay someone who has your best interest at heart. Don't forget to you most realtors are looking at a commision. I know there are some good ones out there, but like I said I have been in the business.

Remember if you ask a question straight out, they are not suppose to lie to you. Get it in writing incase future problems occur.

If you have any further questions, feel free to ask or PM me.

Diane

MrsPete
06-08-2009, 10:00 PM
My advice is all rather general, and I am not at all familiar with these new tax incentives:

Start by figuring out what you can afford. You can find plenty of on-line calculators that'll help you with this. Figure up what your monthly payments will be, and know this information before you start looking.

This is important: Do not spend as much as "everyone" says you can afford. Many of the people who offer this advice are trying to sell you something. If you buy at the top of your price range, you are tying yourself into spending every extra dollar on your house -- and you're tying yourself into doing it for the next 30 years. So you have a baby and you want to stay home a year; if you've maxed out your mortgage, it's probably not a choice. You have surprise triplets and you literally can't afford to work because of the daycare cost; too bad, the bank doesn't care. One of you loses a job, one of you becomes sick, you want to start a business . . . the list could go on. There's also the danger in many parts of the country that your house could go down in value, leaving you owing more than the house is worth. In short, do not buy "as much as you can afford". You can't afford it!

Decide what you're willing to pay. If you believe what I said in the above paragraph, it's less than what you "can afford". Real estate and mortgage professionals are trying to earn bigger paychecks for themselves; if they can sell you "more house", they get paid more. They aren't necessarily looking out for your best interests. That's YOUR job!

Make a list of your must-haves (3 bedrooms, 2 baths) and your wants (home office, fenced-in back yard) and start looking at houses. Be realistic. Sure, you see 20-somethings on HGTV moving into 5-bedroom mini-mansions with inground pools, but that's not the real world, at least not for most of us. When you see "what you can afford" and you start to be tempted by granite countertops, saunas, and built-in outdoor kitchens, refer to that list. If those luxury items are within your "what I"m willing to pay" range, wonderful -- enjoy them! If they're pushing you to the top of your budget, keep looking.

Do you have a decent downpayment? You'll need to put something down. Nothing-down offers cost waaay too much in the long run.

Do not put ALL your money into the downpayment. You're going to have some expenses with moving: Perhaps the carpet will be very worn, perhaps you'll need to buy a refrigerator. SOMETHING will cost you money as soon as you move into the house. For us, it was something like 6-7 things in the first month, and we were seriously wondering if we'd made a mistake. Aside from emergency money, ALWAYS have AT LEAST one mortgage payment in a never-touch savings account.

Investigate all your financing options. For example, if I were buying a house today, I would definitely look at my state employee's credit union. They usually have much better rates than the banks. On the other hand, when we bought our first house, we bought through a first-time homebuyers program offered by the government. It was a good rate.

Do not allow yourself to become too attached to "your house" until you've made the deal. Throw out a low-ball offer to see if your seller will take it, or if he'll come back with something lower. In today's market, you might get lucky. On the other hand, your agent knows your area. If he or she advises you that you'd better jump at something, listen.

Before you make any offer, know what you're willing to pay. If you and the seller can't come to terms, be ready to walk away. You're looking for your first house, not your dream house. You can't afford to sink all your finances into this house.

If you have a feeling the seller won't come down on price, ask for other things instead: Ask him to pay the closing costs -- not quite all the closing costs can legally be paid by the seller, but the lion's share can. As him to leave the dining room set or the washer/dryer. It's okay to ask him to fix the shakey deck, or it's okay to ask for a $2000 allowance for new carpet. This can be a big savings to you. It's okay to ask for ANYTHING to be left: light fixtures, curtains, anything. The seller can always refuse, but you won't know if you don't ask.

This is big: You want a simple-interest loan with no pre-payment penalty. Once you have that loan (and that house!), pay something extra every single month. Just a couple dollars, earmarked to go straight to the principle. As a rule of thumb, every dollar "extra" you pay saves you $3 in interest later, and -- obviously -- it brings closer the day when the house is completely and totally YOURS.

At the closing, do not allow yourself to be rushed. Be sure you understand to what you're committing yourself.

Get a home inspection.
Have a lawyer do a title search to be sure there are no liens against the house.

You may be tempted by a fixer-upper. Think carefully before embarking on this adventure. It takes the right person, with the right spouse, and the right set of skills to do this and make it profitable. Do you really have the knack? Do you have the motivation to come home and do this after your real job? Is this house going to really be something when you're done? For some people, this is a great choice, but tread carefully.

Once you're in the house, don't feel that you have to have it perfect right away. Take your time, paint a room here, buy a piece of furniture there . . . do it bit by bit, and don't go into debt for it.

And good luck!

cay2420
06-09-2009, 05:33 AM
My advice comes from the mortgage side of things as that is what I do. Be careful of using on line calculators to find out what rates are as well as points. Those tools you can use on line are pretty basic and can be misleading. For instance, in Florida and California right now, unless you have 20% down you more than likely have to do FHA financing. There are also properties that are included in "declining markets." If the property is in a declining market there is typically a 5% reduction in the maximum loan amount you are allowed to do. For instance, most of the Washington, DC metropolitan area is considered a "declining market." For conventional financing the least amount you can put down is 5%, but if it is in a declining market you must have 10% down or if it is within FHA loan limits you can do FHA. Basically what I am saying is make sure you go with a reputable lender and make sure you find out as much as you can. Personally, I let my customers know as much as I can whether it is good or bad. The last thing I want to have happen is something come up that I didn't let my customer know up front. This happens way too much in the mortgage world. Stay away from online mortgage companies as this is where many of these problems start in my opinion. I hope some of this helps and doesn't further confuse you. Good Luck!

Adi12982
06-09-2009, 10:55 AM
Thanks so much for all the information so far - it is very insightful. We have a 10% down for the house I am currently interested in, and will have 10% of 150K by the end of this month. . . .

I didn't know about warranty's - does anyone know of any good companies??

Does anyone know anything about buying a bank owned home? I think the house we currently like is bank owned, but will hopefully find out more soon.

Thanks for all the tips and advice, keep it coming L:)

PinkRhombus
06-09-2009, 10:59 AM
Make sure your cars fit in the garage.

We don't have this problem, but the people that bought the house next to us discovered it after the fact: The garage is too short to put their minivan and truck (standard bed Dakota) in.

We always thought the old owners parked outside because they had too much crap in there.

Bad design...didn't come all the way flush with the back of the house like ours does.

JennsBabySky
06-09-2009, 11:22 AM
This weekend, I saw an article in the LA Times regarding the $8000 tax credit and that there were some proposed changes so that the "credit" could be used as cash at closing, if you have an FHA loan. I didn't read the article because I am not a first time home buyer. I did just look up the article on the LA Times website, here it is:

http://www.latimes.com/classified/realestate/news/la-fi-harney7-2009jun07,0,7341387.story

Good luck,
Jennifer

Adi12982
06-09-2009, 11:44 AM
This weekend, I saw an article in the LA Times regarding the $8000 tax credit and that there were some proposed changes so that the "credit" could be used as cash at closing, if you have an FHA loan. I didn't read the article because I am not a first time home buyer. I did just look up the article on the LA Times website, here it is:

http://www.latimes.com/classified/realestate/news/la-fi-harney7-2009jun07,0,7341387.story

Good luck,
Jennifer

oOoO thanks - I'll read it now

Ms.Grumpy
06-09-2009, 02:07 PM
Thank you everyone for the great advice. I am saving all of the awesome advice that has been given so far. I will be a first time buyer, hopefully around Oct-Nov of this year.
OP, thanks for asking this great question!

loonieroonie
06-09-2009, 05:32 PM
Thanks so much for all the information so far - it is very insightful. We have a 10% down for the house I am currently interested in, and will have 10% of 150K by the end of this month. . . .

I didn't know about warranty's - does anyone know of any good companies??

Does anyone know anything about buying a bank owned home? I think the house we currently like is bank owned, but will hopefully find out more soon.

Thanks for all the tips and advice, keep it coming L:)

American Home Shield and 2-10 home warranty are good. They both have websites stating their coverage and policies. Also, I've heard good things about Old Republic Home Warranty, but my personal experience with them was awful. They refused to repair issues that their policy says are covered and I had to call several times until they finally sent someone out to my house, they still wouldn't fix the issue.

Another piece of advise: Get a seller's disclosure. This will tell you in detail what issues the seller has had with the home, if any. Foreclosures, estate owned homes, and investment owned homes will not provide you with disclosures. Think of it this way, a bank has never lived in the home so they cannot tell you its history.

What questions do you have about foreclosures? They take longer to get an answer back to you about your offer, they are typically sold as-is but don't be afraid to ask for repairs. If there is any cosmetic damage to the home (paint, carpet, ugly light fixtures, etc...) ask the bank to fix these or give you an allowance at the time you right the offer (this is true for non-bank owned properties as well). Most banks will say no, but you'd be surprised how many will say yes especially if the home has been on the market for a long time. Not all foreclosures are a disaster. Foreclosed homes have many addendums added to the contract. Read the addendums and understand them.

prncess674
06-09-2009, 09:47 PM
I have a friend who is a Realtor, do you think that is a good idea or bad?? She has been my best friend since high school and we were friends all the way back in middle school.
I am not a fan of mixing business and pleasure. Showing houses is hard work and you need to make sure that your realtor is working for you. Do you really want to be rescheduled to see X house because your friend/realtor confided that little Suzy needs to be picked up at band practice. Also you want to make sure that your realtor specializes in your area and type of purchase. Handling short sales and forclosures (bank owned) are a whole different beast and take a lot of additional knowledge.

The other thing about dealing with friend realtors is do you really want to discuss all your financial dirty laundry with a friend?

renateb
06-09-2009, 10:11 PM
saw lots of good advice and I only have one to add:

Location, Location, Location!!!

Check out the schools. Even if you don't have kids, it will effect the home's value and the value when it's time to move on.

What is the neighbor's yard like, are the homes nearby kept up to the standard you expect?

Check out the neighborhood during different times of day and on a weekend. Is there a crazy dog always barking? Are people out socializing? Are kids out playing?